Oil settles under $94 on weak demand signals

SAN FRANCISCO (MarketWatch) — Oil futures settled below $94 a barrel Thursday, as comments from the European Central Bank’s president about downside risks to the region’s economic recovery raised worries about energy demand.

Prices also fell ahead of the nonfarm payrolls report due Friday, which will be scoured for hints on the progress of recovery in the U.S.

Crude-oil futures for May delivery
CLK3, +0.00%
shed $1.19, or 1.3%, to settle at $93.26 a barrel on the New York Mercantile Exchange.

Prices, which closed at their lowest level since March 21, have now tallied a two-session loss of 4.1%.

The contract settled down $2.74 at $94.45 a barrel on Wednesday, hurt by a bigger-than-expected increase in last week’s U.S. crude supplies and a slowdown in private-payrolls growth.

Wednesday’s petroleum inventory data seemed to be “the straw that broke the camel’s back for this recent rally” in oil, said Matt Smith, commodity analyst at Schneider Electric in Louisville, Ky.

Then Thursday’s poor jobless-claims data — hot on the heels of Wednesday’s weak ADP report and ahead of nonfarm payrolls Friday — combined with downbeat comments” from European Central Bank President Mario Draghi to send crude spiraling lower, he said.

At the ECB’s monthly news conference, Draghi acknowledged that the recovery in the second half of the year is still at risk of being thrown off course.

The Bank of England and ECB reaffirmed the need for ongoing accommodative monetary policy to keep their respective economies from derailing further, Smith said. That likely fed worries about energy demand.

In Japan, the nation’s central bank pledged to achieve a 2% inflation target in about two years and announced plans to increase government bond purchases at an annual pace of 50 trillion yen ($530 billion).

The yen
USDJPY, -0.35%
moved sharply lower, providing support for the ICE dollar index
DXY, -0.01%
But the index later turned lower, to 82.689 from 82.712 seen in late Wednesday in North America as markets awaited the U.S. nonfarm payrolls data due Friday, and as the euro gained more ground against the greenback.

Refineries ramp up output

Weakness in oil prices have also come on the back of rising global crude-oil production, a climb in U.S. refinery utilization rates and lackluster demand for transportation fuels, according to Alan Herbst, a principal at Utilis Advisory Group.

The Energy Information Administration reported on Wednesday U.S. refinery utilization of 84.1% of capacity for the week ended March 29, up from 83.1% a week earlier.

Refiners are ramping up gasoline inventories ahead of the summer driving season, said Herbst.

U.S. supplies of nearly 389 million barrels are also at their highest since 1990, EIA data show.

On Nymex, gasoline for May delivery
US:RBK3
fell 1.5 cents, or 0.5%, at $2.90 a gallon, while heating oil for the same month
US:HOK3
closed down nearly 4 cents, or 1.3%, at $2.96 a gallon.

At the retail level, the average price for a gallon of regular gasoline stood at $3.636 down from $3.64 a day earlier, according to AAA’s Daily Fuel Gauge Report. Prices are also down about 10 cents from a month ago and 29 cents below the year-ago level.

Reduced tensions in the Middle East and concerns about lackluster economic activity in the Far East are also playing a role in crude’s price decline, Herbst said, adding that he expects to see May crude soften by another $1 to $1.50 per barrel to $91.50 to $92 in the coming weeks.

Elsewhere in the energy complex, May natural gas
US:NGK13
put on 5 cents, or 1.2%, to $3.95 per million British thermal units.

Natural-gas futures briefly turned lower after the EIA on Thursday reported a 94 billion-cubic-foot decline in U.S. inventories. Analysts polled by Platts forecast a decline between 90 billion cubic feet and 94 billion.

Traders may be anticipating weaker data going forward, said Tim Evans, an energy analyst at Citi Futures, but the data was clearly supportive compared with the 4 billion-cubic-foot increase seen during the same time a year ago.

Intraday Data provided by SIX Financial Information and subject to terms of use. Historical and current end-of-day data provided by SIX Financial Information. All quotes are in local exchange time. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only. Intraday data delayed at least 15 minutes or per exchange requirements.